Page:United States Statutes at Large Volume 100 Part 3.djvu/370

 100 STAT. 2178



PUBLIC LAW 99-514—OCT. 22, 1986

"(iv) makes an election, revocable only with the consent of the Secretary, to be treated as a private foundation for purposes of this title (other than section 4940, relating to excise tax based on investment income). "(7) DEFINITIONS AND SPECIAL RULES.—For purposes of this subsection— "(A) BASIC RESEARCH.—The term 'basic research' means any original investigation for the advancement of scientific knowledge not having a specific commercial objective, except that such term shall not include— "(i) basic research conducted outside of the United States, and "(ii) basic research in the social sciences, arts, or humanities. "(B) BASE PERIOD.—The term 'base period' means the 3taxable-year period ending with the taxable year immediately preceding the 1st taxable year of the taxpayer beginning after December 31, 1983. "(C)

EXCLUSION FROM INCREMENTAL CREDIT CALCULA-

TION.—For purposes of determining the amount of credit allowable under subsection (a)(1) for any taxable year, the amount of the basic research payments taken into account under subsection (a)(2)— "(i) shall not be treated as qualified research expenses under subsection (a)(l)(A), and "(ii) shall not be included in the computation of base period research expenses under subsection (a)(1)(B). "(D) TRADE OR BUSINESS QUALIFICATION.—For purposes of

applying subsection (b)(1) to this subsection, any basic research payments shall be treated as an amount paid in carrying on a trade or business of the taxpayer in the taxable year in which it is paid (without regard to the provisions of subsection (b)(3)(B)). "(E) CERTAIN CORPORATIONS NOT ELIGIBLE.—The term 'corporation' shall not include— "(i) an S corporation, "(ii) a personal holding company (as defined in section 542), or "(iii) a service organization (as defined in section 414(m)(3))." (d) RESEARCH CREDIT TREATED AS OTHER BUSINESS CREDITS.—

(1) IN GENERAL.—Section 38(b) (relating to current year business credit), as amended by this Act, is amended by striking out "plus" at the end of paragraph (2), by striking out the period at the end of paragraph (3) and inserting in lieu thereof ", plus", and by adding at the end thereof the following new paragraph: "(4) the research credit determined under section 41(a)." (2) TRANSFER OF RESEARCH CREDIT TO SUBPART RELATING TO BUSINESS CREDITS.—Section 30 (relating to credit for increasing

research activities) is hereby transferred to subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue (I!ode of 1986 (as amended by this Act), inserted after section 40 of such Code, and redesignated as section 41 of such Code. (3) TECHNICAL AND CONFORMING AMENDMENTS.—

(A)(i) Subsections (b) and (c) of section 28 are each amended by striking out "section 30" each place it appears and inserting in lieu thereof "section 41".

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